How perfect combination of A&B book trading can help your forex business?

How perfect combination of A&B book trading can help your forex business?

Written by: Himanshu Bengani

26 Dec 2018

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Acquiring hands on profits in forex trade market has always dominated by the experienced brokers. Various brokers are adopting new trends in forex markets and base their tactics and plan of action accordioning. These brokers keep themselves updated about the change in market trends, new models and technologies which increases the profit gaining ratio by drastic numbers.

Models of forex trading changes with time. Traditionally A Booking and B booking model were used to earn profits from the trades. These models were effective for gaining commendable profits, but brokers experimented using both the models together combining it perfectly and it turned out to be a huge success in terms of profits and implementation of plan of action. The trades became easy to convert into profits and hence a new Hybrid model of forex trading came into being.

What do profits look like in A Book, B Book, and Hybrid Trading?

Just being A book broker, you will earn profits either by the commission or by increasing the spreads by being the intermediary between your client and liquidity provider.

Just being a B book broker profits will be earned by trading against your clients and if your client losses you earn and vice-versa.

But being a hybrid broker can give you the best of both worlds. As mentioned earlier hybrid broker practices both A book and B book model but to earn better profits you got to keep the perfect combinations of both A book model and B book Model.

Nowadays most of the brokers including ECN/STP, DMA or ECN brokers are using hybrid models to increase their profit ratio and margins.

IQ Option, 10markets, 12Brokers, AAAFx, PaxForex, ADSPrime, AGEA, AL Trade, Alpari, BancoFx, BTFX, Caesar Trade, CornerBroker, DF Markets, EightCAp, FinnOdds, Forex FS, GBE Brokers, Grand Capital, Harborx, INTFX, OloFx, Progrex are some of forex brokers who have opted for hybrid model of forex trading. There is a never-ending list for such brokers and the only reason they have opted for the hybrid model is that they have experienced how well can they grow their profit with this model.

How to combine A book trading and B book trading to make a perfect hybrid model?

Let’s break it down point wise:

Analyze the data: - Analyze the trade that your client is interested in. Identify the margin of profit you can make on the trade. With the advancement in technology, there are few special software that can help you with it. Use of such software will lower the error rate and hence higher profit rate. The software will filter the clients according to the size of their deposits.

If you can earn more profits by commissions and/or spreads then go for A book model. Another reason for going with A book model is when the risk is on the higher side.

If your analysis suggests that you can earn more while trading against your client and risk factor is low then go for B type model

The idea is not to just depend on one particular model of trading and combining both according to the market fluctuations

Do not rely completely on the software while analyzing the trade. Yes software will help you to a great extent and you will make definite profits but if your experience is telling you otherwise, do not hesitate taking small risks.

How to take client under confidence while using the hybrid model?

It is no shock that the clients do not prefer B book trading model. So the question arises that how to develop the confidence in your clients and make them believe in your strategy?

Transparency: - Every client appreciates transparency in their trades. A long as they don’t feel defied, they’ll believe in you. Non-transparent pricing can push your clients away.

Do not just focus on your profit.

Never give wrong advice to your clients. If your client approaches you for some advice in making the trade, be loyal to them. Do not hurt their confidence in you for making a few extra profits. Bonding with your clients, giving advice to them and helping them make a profit will make them stay with you much longer.

Navigate the pros and cons of both A book and B book trading. Most of the clients disapprove B type trade because all they know about it is the cons. Here are some listed Pros and Cons of both A book and B book trading that you can use to convince your clients:

A type Trading Model

Pros:

1. No conflict in the interest of both the parties.

2. Positive Slippage

3. Lesser Risk

Cons:

1. Spreads that could widen

2. Negative Slippage

3. Trading fees are higher

B type Trading Model

Pros:

1. Execution order takes less time and is almost instant

2. Spreads are mostly fixed if not the widening of spread is very minimum

3. Trading fees are low

4. Leverages are high

Cons:

1. Conflict of interest in both the parties

2. Only negative slippage

Use these pros and cons to make your client understand that every model is both good and bad for them and not using a particular model increases the success rate of their trade as well. Always ensure the client that the interest and motivation of both the parties are aligned.